News | June 15, 2022

PART 3 – TPR flexes its muscles: recent Regulatory Reports

The publication of two recent intervention reports, one in March 2022 and an update to another in May 2022, has ended a relatively quiet spell since the Pensions Regulator (“TPR”) last published an intervention report in July 2021. The latest reports demonstrate TPR will continue to flex its muscles and, if needs be, re-engage with schemes where there continues to be unresolved problems.

1) Dosco Overseas Engineering Limited (“Dosco”)

Key Points

1. TPR can issue CNs against companies outside of Great Britain – challenges remain in enforcing CNs outside of Great Britain.

2. TPR has, and will, issue CNs for investment loss and interest – whether TPR’s quantification of investment loss and interest will withstand the test of time remains to be seen.

3. A reminder that CNs can be issued against individuals too and not just companies.


In this case, TPR flexed its anti-avoidance powers in relation to a management buy-out in 2013 of an engineering business from its German parent company. The buy-out resulted in the employers being unable to support the pension scheme. Soon after, the employers went into administration and the scheme entered into an assessment period with the Pension Protection Fund.

A contribution notice (“CN”) was issued against the former parent company for just over £2 million which included around £670,000 for lost investment returns and interest. A settlement of around £130,000 was also made with a key individual. It was the first time the Determinations Panel awarded an additional sum for lost investment returns and interest as part of the CN.


The Determination Panel held that TPR has jurisdiction to issue a CN against the German entity. One of the main reasons why the Panel came to this conclusion is because the statutory authority for issuing a CN falls back to the definition of a “company” under the section 435(11) of the Insolvency Act 1986 which means “any body corporate (whether incorporated in Great Britain or elsewhere)“. The Panel determined that Parliament intended for the CN regime to apply to companies wherever they are incorporated.

Whilst the Panel ruled on whether TPR can issue CNs outside of Great Britain, it suggested that “questions of enforcement are not relevant to its decision whether or not to issue a CN“. It would seem, therefore, that the separate question of whether a CN can be enforced outside of Great Britain was left in abeyance.

Quantification of Interest and Investment Loss

One of the principal arguments for awarding the additional sum of around £670,000 was that, had around £1.4million of cash not been taken out of the Employer businesses (in the form of ‘Employer Loans’) then that sum would have been paid to and invested in the Scheme. The £670,000 additional sum broadly comprised of two parts: (i) an amount for interest for between May 2013 and December 2015; and (ii) an amount for investment loss between December 2015 and December 2020.

The Panel had difficulty establishing the date in which to award investment loss from. In particular, the Panel held that it would not be appropriate to calculate the investment loss from the date of the management buy-out (which completed in May 2013). In speculating when the scheme may have received a similar around to the £1.4million of cash, TPR felt it may have been by December 2015.

The Panel felt it would be too speculative to calculate the loss of investment return between May 2013 and December 2015. On the other hand, it would not be appropriate to make no award at all. The Panel, therefore, made an award of interest at 2% above base rate for this period. Whilst the specific rate of interest had not been challenged by the employers, the Panel held this was “not only justifiable but conservative” given that the ‘vendor loan’ was more than 5% or 6% above various base rates.

It remains to be seen whether this methodology for calculating investment loss and interest will withstand scrutiny in future cases, particularly, given the speculative nature in calculating what amounts and when contributions may have been paid to a scheme. The Box Clever scheme is one such case where TPR is currently being challenged in this regard. TPR has issued a warning notice to the value of £133million against a £31 million settlement offer by ITV in 2020. The quantification of amounts demanded under TPR’s moral hazard powers is, therefore, a developing area.

Other Observations

Mr Cain was a key individual for leading and encouraging the management buy-out. TPR issued a warning notice against Mr Cain. TPR argued Mr Cain had personally benefitted from the transaction under a consulting agreement valued at €250,000. TPR reached a settlement with Mr Cain for around £130,000 and subsequently withdrew his case from the Panel as a result.

The Pension Schemes Act 2021 strengthens TPR’s anti-avoidance powers. However, the Determination Panel succeeded in exercising its powers under the existing regime. What impact would the new statutory regime have had on this case? Would the amount of the CN issued by TPR been greater? Or would it have not made much difference given TPR succeeded under the existing regime? Only time will tell how TPR may exercise its new powers in the future!

TPR’s full report can be found by clicking here.

2) Merchant Navy Ratings Pension Fund (“MNRPF”)

Key Points

1. TPR expects trustees to adhere to high standards of governance and take steps to remedy issues where TPR identifies poor governance.

2. Where trustee governance does not meet TPR’s required standards and trustees do not remedy governance issues, TPR will not hesitate to intervene and use its powers to appoint an independent trustee.

3. TPR will work with trustees to reach practical solutions to governance issues if the parties involved fail to reach an agreement.

TPR has set out its expectations following its intervention in the MNRPF in its intervention report, updated on 5 May 2022.

Previously, on 28 November 2018, TPR opened an investigation into the governance of the MNRPF and issued a warning notice on 1 May 2019 setting out its recommendation to appoint an independent trustee due to numerous governance issues. TPR engaged with the trustee and the other affected parties to improve the governance of the scheme. This regulatory action concluded with a hearing before TPR’s Determinations Panel. A Determination Notice was issued on 16 March 2020.

TPR re-engaged with the trustee again on 2 March 2021 when potential governance issues were highlighted that impacted the trustee’s ability to make decisions on a number of critical matters. TPR proposed to restructure the trustee board (as set out below) to resolve the potential governance issues.

On 1 May 2019, TPR’s warning notice highlighted governance failures by the trustee board including:

  • a failure to acknowledge the criticisms or put in place the recommendations made in the Baroness Report on 14 August 2018 on the behavioural issues within the trustee board;
  • a failure to consider conflicts of interest;
  • a lack of trust, openness and mutual respect;
  • a breach of duty to act prudently by not taking into account the advice of independent professional advisers;
  • a failure to act as one board collectively, largely due to the MNRPF’s dual majority voting system;
  • breaches of the board’s duty of confidence; and
  • the board’s refusal to acknowledge previous failings illustrated in two previous reports it had itself commissioned to address its own governance issues.

On 31 July 2019, TPR wrote to the trustee recommending a number of changes to the composition of the trustee board and appointment terms including the resignation or removal of all incumbent trustee directors.

By the time that Determination Panel convened on 27 February 2020, all but one of the incumbent trustee directors had been removed. Due to the changes that had been made to the trustee board, the Determination Panel held that the scheme no longer needed to appoint an independent trustee in place of the incumbent trustee directors.

The scheme was left with an interim board whose objective was to put in place a new permanent board by 1 April 2021 consisting of nine permanent trustee directors: three employer directors; three beneficiary directors and three independent directors.

The entity representing the employers objected to the union’s nomination of previously appointed beneficiary directors on the basis that the employers had previously been told by TPR not to appoint previous employer directors. This resulted in deadlock whilst time-sensitive projects were being carried out. As there was a risk of an inquorate board by 1 April 2021, TPR intervened again (which is reflected in TPR’s updated intervention report).

TRP proposed a restructuring of the trustee board to only have three independent trustee directors – a move away from the previous structure which had caused the governance issues in the past. The independent trustee directors would be appointed by a joint working group of employer and union representatives. The proposal was accepted and three independent trustee directors were appointed.

TPR’s full report can be found by clicking here.